Should You Buy Eli Lilly Stock Now or Wait for a Dip?

Eli Lilly (NYSE: LLY) is back up to $1 trillion in market cap. This year, the stock is up a modest 5%, but over five years, its returns are incredibly impressive at over 400%. The healthcare giant has become a huge player in the GLP-1 weight loss market, and investors have been loading up on its shares amid the opportunities in that space.

What may be troubling, however, is its valuation. That's because it's now trading at 40 times its trailing earnings, which isn't exactly cheap. Is Eli Lilly stock still a good buy today, or are you better off waiting for a possible pullback in its price?

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Eli Lilly's business looks terrific in the long run

When investing, it's key to focus on the long term, to ensure your focus is on where a company is heading in the future, not just where it is today. And Eli Lilly's growth prospects look incredibly promising given the diversity of its operations and the growth-oriented nature of its management.

The company is in the early innings of growing its GLP-1 products, Mounjaro and Zepbound. While they're already generating billions in sales, they may still generate much more in the future. Plus, the company has been acquiring other healthcare companies to expand its operations, such as Orna Therapeutics, which develops RNA therapies for cancer and autoimmune diseases. Last month, Eli Lilly also announced a trio of acquisitions that would expand its infectious disease portfolio.

Eli Lilly's deep pockets enable it to continue investing in its future, making it a compelling long-term investment. In the trailing 12 months, its net income has totaled $25.3 billion, a considerable increase from just a couple of years ago, when its profit was nearly one-fifth of that total.

The stock is expensive, but it may still be worth buying right now

For a top growth stock, you may end up having to pay a hefty premium. But in return, you get an investment in a top company with some promising long-term growth opportunities. That's what Eli Lilly's stock represents today. It isn't cheap, but it can still be a good buy at its current valuation, given its terrific upside.

In the short term, it may fluctuate due to market conditions and broader healthcare reform concerns. But over the long run, I'm confident the business will do well and continue to grow strongly. As long as you're committed to owning the stock for the long term (i.e., at least five-plus years), this can be an excellent investment to add to your portfolio today.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.